Cash Systems

I currently do not use a cash system. I have in the past and it worked great, the only reason I stopped doing it was I moved into an “electronic” envelope system using Microsoft Money.

Let me explain what an all cash system is and why I think it is a good thing.

At the beginning of the month you withdraw all the money you need for the month from your budget. ($100 for groceries; $75 for eating out; $120 for gas; $25 for entertainment) or whatever else you want to use it for. You keep all that cash in envelopes in your house and when you spend money for a certain category it comes from that envelope.

If there is no more money in that envelope you do not spend anymore money in that category. I always suggest that you make food a little higher (especially when you start out) because when you run to the end of the money and you are out of food money you will be going on a major diet.

Seeing that cash dwindle down as the month goes along causes you to have an emotional response to your spending which then makes you understand that you might need to cut back. Where as if you could not visually see cash exiting you would not be inclined to adjust your spending patterns if you were overspending in a certain area.

A buddy of mine, Jon, is a waiter at Cafe Strudel. And when he comes home he has TONS of cash cause he is such a good waiter. What he does with it when he gets home is sorts it into categories for the next month. He has one of those accordion style folders with different compartments and he funds next months spending categories. When everything is fully funded he then moves on to long term goals. It is a really cool system and I think I would encourage anyone in a similar situation who has an irregular income to adopt this.